What does utmost good faith require in insurance contracts?

• A. Both parties must disclose all material facts.
• B. Only the insured must disclose material facts.
• C. The insured can withhold any information.
• D. The policy voids if misrepresentations are discovered.

Answer: (A)

Utmost good faith in insurance contracts means honesty and full disclosure from both sides when forming the agreement. For the insured, this means revealing all material facts that could influence the insurer’s decision to issue the policy or set the premium—things like past claims, health conditions, or changes in property use. For the insurer, it means clearly communicating the policy terms, limits, conditions, and exclusions, and not withholding information that could affect the insured’s understanding of coverage. When either side withholds material information or misrepresents details, the contract may be considered voidable or claims can be denied because the risk assessment and the agreement were not based on complete, accurate information. That shared obligation to disclose all material facts is why the correct answer states both parties must disclose.